The Justice Department and a number of state attorneys general on Tuesday challenged a proposed $11 billion merger between US Airways Group and American Airlines' parent company, AMR Corp.
US Airways shares fell more than 10 percent at one point in active trading. The two airlines strongly defended their combination.
"We will mount a vigorous defense and pursue all legal options in order to achieve this merger and deliver the benefits of the new American to our customers and communities as soon as possible," they said in a statement.
The Justice Department says the deal would result in the creation of the world's largest airline and that a combination of the two companies would reduce competition for commercial air travel in local markets and would result in passengers paying higher airfares and receive less service.
The federal government and the state attorneys general filed a lawsuit filed in federal court in Washington, D.C., seeking to prevent the companies from making the deal.
A spokesman for US Airways had no immediate comment. American Airlines did not immediately return a call seeking comment.
In February, the companies disclosed their plans to create a company with 6,700 daily flights and annual revenue of roughly $40 billion.